- Companies and their leadership must have a purpose beyond just making money in order to retain their license to operate and gain the support of customers, employees, shareholders and society in general.
- Companies must consider both the risks and opportunities that social impact prioritization offers. The Canadian financial ecosystem must also become more risk-taking in order for our social innovators to flourish in Canada.
- Large businesses and Canadian governments must use the power of procurement to encourage SMEs to adopt sustainable practices throughout their entire supply chain. The government must create sustainable procurement guidelines.
We need more leadership when it comes to ESG, climate, SDGs, diversity and social impact. When I look around, I am a little afraid that we are all just waiting to get bailed out and I am afraid that nature and the future generation of talent are not going to bail us out.
Is social impact a new consideration for businesses?
Social impact is still a new consideration for many companies. Having said that, most companies were started witha purposein mind – a need fora product or service – many with a positivesocial impact. However, many companies forgot about their originalpurposein the race towards shareholder value.
What we have witnessedin the last coupleof years is that many companiesarere-discovering, re-visiting or some fullyredefining their purpose based on, for example, the Sustainable Development Goals (SDGs). Companies are examining their negative externalities and also exploring opportunities for social innovation.
Customers, employees as well as shareholders and societies in general, are starting to usetheir bargaining power to hold businesses to a higher standard in terms of social impact. You do not get the license to operate anymore if you do not have a purpose that goes beyond making money.
“You do not get the license to operate anymore, if you do not have a purpose that goes beyond making money.”
In the past, there were voluntary social impact initiatives that businesses chose to opt for to maintain a good public image. But now, those initiatives are going from soft directives to hard and concrete laws. For example, companies in France are held responsible by law, not only for their own company but also for their suppliers.
News today is filled with droughts, severe storms, flooding, and other devastating weather events, and most leaders understandthat natural disasters and climate change are impacting business. If they are not directly impacting your business, they could certainly be impacting your suppliers’ businesses, your customers or your employees. But, companiesand their boardsneed to consider not just the risks but also the opportunities that social impact prioritization offers.That is how they will attract the talent of the future.
What is the business case for social innovation and how can we accelerate its uptake in Canada?
There are a lot of companies that have not yet seen the business case for social innovation. Larger companies seem more willing and able to incorporate social and environmental sustainability into their core processes than SMEs. We conducted a survey of large companies in Canada asking them what they expect from companies in their supply chain when it comes to sustainability. We found that large companies are becoming more and more willing to use the power of procurement to incentivize sustainable practices in their supply chain. We then asked SMEs if they were willing to adopt sustainability practices, and not a lot of SMEs responded favourably, and many were not fully aware of larger companies’ procurement standards and how to meet them.
If larger companies use their power of procurement positively, Canadian small businesses will be able to take advantage of an amazing opportunity, both domestically and internationally. We could be moving towards a system in which all SMEs, in partnership with large companies, will drive sustainable innovation. That would be a game changer and improve theCanadian economy big time.
“Large companies are becoming more and more willing to use the power of procurement to incentivize sustainable practices in their supply chain.”
Consumers buy a product or service because they connect with a business and its brand. Of course,theprice is an issue, but if we start pricing the externalities of making products, sustainable products are bound to be more cost-effective.
In the interviews my company, Competent Boards, conducted, one of the things we continuously heard from Canadian and global leaders is that the more efficiently and responsibly they run their companies, the more profitable they become.
What can Canadian companies, governments and investors do to improve the Canadian impact economy?
At a very general level, we need more leadership when it comes to ESG, climate, SDGs, diversity and social impact. When I look around, I am a little afraid that we are all just waiting to get bailed out and I am afraid that nature and the future generation of talent are not going to bail us out. In the meantime, many board members and executives will lose their credibility and damage their reputation as leaders. This is why I started Competent Boards; because we need leadership to set the tone from the top. A tone that encourages and ensures well-informed decisions are made around sustainability, climate, diversity, ESG, anti-corruption and social impact. There is a tremendous upside for boards and companies that step up as leaders.
“We could be moving towards a system in which all SMEs, in partnership with large companies, will drive sustainable innovation.”
There are 17 UN Sustainable Development Goals. I am not saying that all companies should address all 17 SDGs, but there are some that Canada and Canadian companies can have a much better impact on.
If I put my Nordic hat on, innovators and investors there are aiming to solve issues at the global level. They are choosing their next investments and business options based on countries’ commitments to the SDGs. I am truly fascinated and impressed with Canadian innovation, but it seems like many great scientific breakthroughs disappear from Canada. For example, insulin was invented in Canada but Novo Nordisk, a huge Danish company, bought its patent probably at a low price. Today, the world often only recognizes Novo Nordisk when it comes to insulin, not Canadian scientists. Even today, we could do a bit more to keep Canadian innovation in Canada. Why not export the good solution instead of just selling our research? And addressing one or more SDGs as part of that solution or product is a crucial consideration in terms of global competitiveness.
“If we start pricing the externalities of making products, sustainable products are bound to be more cost-effective.”
Going back to my point about the power of procurement, it is not just limited to the private sector. The public sector also needs to step up and create sustainable procurement guidelines. For example, in the US businesses are required to support women-owned businesses.
I also think our financial sector could be less risk-averse, especially when it comes to investment and credit for the impact economy. That would help Canadian businesses, Canada, the world and the banks.
What would be your advice to young people interested in sustainability and the impact economy?
I’m happy that so many young people today care about sustainability, and we want to ensure that they get to work on the issues they are passionate about. I would advise young people to not necessarily start in a business’ sustainability department. I would join a different function of the business because to help transition the core of a business, you first need to understand the business. My business law and accounting backgrounds have made it easy for me to understand and speak ‘the same language’ as boards, investors, CFOs, sales and procurement teams. If you do not understand how all those functions think and what their incentives are, you go back to being in the sustainability department that writes the sustainability report and does not really talk to the business aspect, and hence you don’t have the impact you want or could have.
You recently founded Competent Boards. How can Canadian boards become more impactful?
The key to being more impactful is to ensure that all board members are fully aware of the short- and long-term impact of their decisions and their responsibility to stakeholders, not just shareholders.It is their job to ensure that the company survives and hopefully thrives in a world of uncertainty and a growing number of issues and expectations from many stakeholder groups. So they need to be able to identify the material issues and act upon those.
“The key to being more impactful is to ensure that all board members are fully aware of the short- and long-term impact of their decisions and their responsibility to stakeholders, not just shareholders.”
To do that, I would urge that boards ensure that they are well-informed in ESG, climate, diversity, human rights, supply chain, SDGs, responsible data, anti-corruption, and other issues. The impact of a well-informed decision is substantial. That is why board members around the world have asked us to create the Competent Boards Certificate Program.